AUSTIN, Texas -- Texas has awarded the state's first lease for geothermal energy production to a company planning to explore the renewable energy's potential along seven Gulf Coast counties.

Ormat Technologies, Inc. paid $55,645, or $5 an acre, for the right to explore 11,129 acres for pockets of hot water and steam under the ocean floor, the General Land Office announced Tuesday.

"We got more bids than we expected," Texas Land Commissioner Jerry Patterson said. "I think that's a good sign geothermal might just be an economically viable form of renewable energy for Texas."

The Texas Permanent School Fund, which helps funds the state's public education, will get 10 percent of any energy revenues that Reno, Nev.-based Ormat produces on state land.

Producers create geothermal energy by tapping into warm geologic strata to withdraw hot water and steam that is brought to the surface to drive turbines, which in turn drive electricity generators.

Spokesman Paul Thomsen said the project will enable Ormat to evaluate the region's potential for geothermal energy, which it hopes to produce within two to five years.

He said the company will consider using capped oil and gas wells on submerged state coastal properties. The company hopes to find adequately hot temperatures between 4,000 and 6,000 feet below the surface, he said.

"The idea is if we can utilize existing wells, it reduces the risks in drilling," Thomsen said.